SAO PAULO (AP) -- Police say a wad of cash stuffed in a woman's bra saved her life during a shootout in northeastern Brazil.
Salvador city police spokesman Vicente de Paula says 58-year-old Ivonete Pereira de Oliveira was a passengers on the bus that two gunmen held up on Saturday.
He says an armed off-duty policeman on the bus opened fire. In the ensuing gunbattle a bullet struck the left side of Oliveira's chest.
De Paula said Tuesday that the 150 reals (about $70) worth of bills that Oliveira hid inside her bra slowed the bullet enough to prevent it from entering her heart and killing her instantly.
Oliveira underwent surgery to remove the bullet from her left breast and was released from the hospital on Monday.
The off-duty police officer was killed.
Tuesday, April 14, 2009
Bernanke Sees Tentative Signs Economy Stabilizing
ATLANTA - Federal Reserve Chairman Ben Bernanke said Tuesday the latest figures on housing and consumer spending suggest a rapid contraction in the economy could be easing.
"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding and consumer spending, including sales of new motor vehicles," Bernanke said in remarks at Morehouse College.
Some recent reports have suggested a moderating of the economy's downturn but data Tuesday was less encouraging, with the Commerce Department reporting retail sales fell 1.1 percent in March where economists had foreseen a 0.3 percent rise.
The Fed has cut interest rates effectively to zero and has created a broad range of lending facilities to ensure that banks can remain above water despite massive losses from mortgages and other consumer loans.
Bernanke said the U.S. central bank will definitely reverse its monetary policy at some stage to prevent inflation.
The Fed will "make sure we do raise rates at an appropriate time and make sure we don't leave rates too low for too long, because it can have adverse effects, at least on inflation," Bernanke said in response to questions.
Likewise, said some of the Fed's programs aimed at boosting lending may one day have to be removed in order to prevent the stimulus from building into an outright threat of inflation.
"We have a number of effective tools that will allow us to drain excess liquidity and begin to raise rates at the appropriate time," Bernanke said. "That said, unwinding or scaling down some of our special lending programs will almost certainly have to be part of our strategy for removing policy stimulus once the recovery is under way."
In the meantime, Bernanke said the Fed was exploring an expansion of the types of credit made available through its program to restart securitization markets, the Term Asset-Backed Securities Lending Facility, or TALF.
Bernanke did not specify what areas were under consideration, but authorities have said the program may expand to include commercial mortgage-backed securities and older securities, rather than only recently issued ones.
Response to TALF so far has been lukewarm. While the central bank had allotted $200 billion in loans, only about $6.4 billion in deals have emerged in two auctions thus far.
Bernanke took pains to justify actions taken to save insurance giant American International Group, which has been embroiled in a controversy over lavish bonuses paid after the firm had already received $180 billion in taxpayer aid.
He argued that the firm's collapse would have compromised the entire global financial system.
Nonetheless, he argued that direct support to financial institutions and loans to investors would not compromise the taxpayer, or lead to the threat of inflation.
"I can assure you that monetary policy-makers are fully committed to acting as needed to withdraw on a timely basis the extraordinary support now being provided to the economy, and we are confident in our ability to do so," Bernanke said.
He also said the U.S. dollar remains the main currency of reserve holding and international transactions.
"The dollar remains the dominant currency in terms of reserve holdings and in terms of international transactions. That situation has not changed and I really don't see any prospects of it changing in the foreseeable future," Bernanke said in response to a question.
"But it is important for us to make sure that the dollar stays strong and the best way to make the dollar strong is to take policy actions that will allow the U.S. economy to have a strong recovery."
REUTERS
"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding and consumer spending, including sales of new motor vehicles," Bernanke said in remarks at Morehouse College.
Some recent reports have suggested a moderating of the economy's downturn but data Tuesday was less encouraging, with the Commerce Department reporting retail sales fell 1.1 percent in March where economists had foreseen a 0.3 percent rise.
The Fed has cut interest rates effectively to zero and has created a broad range of lending facilities to ensure that banks can remain above water despite massive losses from mortgages and other consumer loans.
Bernanke said the U.S. central bank will definitely reverse its monetary policy at some stage to prevent inflation.
The Fed will "make sure we do raise rates at an appropriate time and make sure we don't leave rates too low for too long, because it can have adverse effects, at least on inflation," Bernanke said in response to questions.
Likewise, said some of the Fed's programs aimed at boosting lending may one day have to be removed in order to prevent the stimulus from building into an outright threat of inflation.
"We have a number of effective tools that will allow us to drain excess liquidity and begin to raise rates at the appropriate time," Bernanke said. "That said, unwinding or scaling down some of our special lending programs will almost certainly have to be part of our strategy for removing policy stimulus once the recovery is under way."
In the meantime, Bernanke said the Fed was exploring an expansion of the types of credit made available through its program to restart securitization markets, the Term Asset-Backed Securities Lending Facility, or TALF.
Bernanke did not specify what areas were under consideration, but authorities have said the program may expand to include commercial mortgage-backed securities and older securities, rather than only recently issued ones.
Response to TALF so far has been lukewarm. While the central bank had allotted $200 billion in loans, only about $6.4 billion in deals have emerged in two auctions thus far.
Bernanke took pains to justify actions taken to save insurance giant American International Group
He argued that the firm's collapse would have compromised the entire global financial system.
Nonetheless, he argued that direct support to financial institutions and loans to investors would not compromise the taxpayer, or lead to the threat of inflation.
"I can assure you that monetary policy-makers are fully committed to acting as needed to withdraw on a timely basis the extraordinary support now being provided to the economy, and we are confident in our ability to do so," Bernanke said.
He also said the U.S. dollar remains the main currency of reserve holding and international transactions.
"The dollar remains the dominant currency in terms of reserve holdings and in terms of international transactions. That situation has not changed and I really don't see any prospects of it changing in the foreseeable future," Bernanke said in response to a question.
"But it is important for us to make sure that the dollar stays strong and the best way to make the dollar strong is to take policy actions that will allow the U.S. economy to have a strong recovery."
REUTERS
TAX FREEDOM - Good News!
America Will Work 8 Days Less to Pay Taxes in 2009 than in 2008; Recession, Stimulus Package Push Date of Celebration Up
Washington, DC, March 31, 2009 - Tax Freedom Day will arrive on April 13 this year, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.
This is eight days earlier than in 2008, and a full two weeks earlier than in 2007, for two reasons: (1) the recession has reduced tax collections even faster than it has reduced income, and (2) the stimulus package includes large temporary tax cuts for 2009 and 2010. Nevertheless, Americans will pay more in taxes than they will spend on food, clothing and housing combined.
In the study, Tax Foundation Special Report No. 165, "America Celebrates Tax Freedom Day," Tax Foundation staff economist Josh Barro traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and finally calculates a Tax Freedom Day for each state.
Taxes and Federal Deficit
Tax Freedom Day moves somewhat independently from an alternative calculation that adds the federal budget deficit to total taxes collected. In 2009, an unprecedented budget deficit over $1.5 trillion produces a date of May 29. This is the latest date in the year this deficit-inclusive measure has ever fallen. The only previous years when taxes and deficit spending comprised a similarly large share of national income were 1944 and 1945, at the peak of World War II. In the postwar era, this date had never fallen later than May 9 (in 1992). Figure 1 below shows Tax Freedom Day as traditionally presented and with the inclusion of the federal budget deficit, since 1967 (click to enlarge).
Tax Freedom Day Fluctuations in Recent Years and Predictions for the Near Future
In 2000, Tax Freedom Day was celebrated May 3, the latest date ever. A string of tax cuts between 2001 and 2003 pushed Tax Freedom Day up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004. For the next three years, incomes and tax collections soared, pushing Tax Freedom Day back to April 26 in 2007.
Since 2006, corporate tax revenues have fallen sharply and are projected to do so again in 2009. Personal income taxes also fell in 2008 and are expected to fall again in 2009 due to the weakening economy and tax cuts in the stimulus package. Because most of this year's stimulus package's tax cuts continue through 2010, Tax Freedom Day could be expected to shift later by a few days next year only if the economy improves. For 2011, both the stimulus package's tax cuts and the earlier Bush tax cuts of 2001 and 2003 are set to expire. The future timing of Tax Freedom Day will depend on which tax cuts Congress and the Obama Administration choose to extend through 2011 and thereafter.
Which Taxes Are the Biggest?
Five major categories of tax dominate the tax burden. Individual income taxes, both federal and state, require 38 days' work. Payroll taxes take another 27 days' work. Sales and excise taxes, mostly state and local, take 15 days to pay off. Corporate income taxes take 6 days, and property taxes take 12. Americans will log 4 more days to pay other miscellaneous taxes, most notably including motor vehicle license taxes and severance taxes, and about 1 day for estate taxes.
Tax Freedom Day by State
Residents of Alaska will bear the lowest average tax burden in 2009. Because of their modest incomes and extremely low state-and-local tax burden, we estimate Alaska's Tax Freedom Day for 2009 to be March 23. Louisiana, Mississippi, South Dakota and West Virginia round out the five states that we project will experience Tax Freedom Day earliest in 2009.
The residents of Connecticut will celebrate last, as usual, working until the 120th day of the year, from January 1 to April 30, before earning enough to pay all their taxes. Because Connecticut's income per capita is higher than in any other state, its residents pay extraordinarily high federal income taxes. Nearby states New Jersey and New York are second and third, respectively. California and Maryland round out the top five.
Washington, DC, March 31, 2009 - Tax Freedom Day will arrive on April 13 this year, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.
This is eight days earlier than in 2008, and a full two weeks earlier than in 2007, for two reasons: (1) the recession has reduced tax collections even faster than it has reduced income, and (2) the stimulus package includes large temporary tax cuts for 2009 and 2010. Nevertheless, Americans will pay more in taxes than they will spend on food, clothing and housing combined.
In the study, Tax Foundation Special Report No. 165, "America Celebrates Tax Freedom Day," Tax Foundation staff economist Josh Barro traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and finally calculates a Tax Freedom Day for each state.
Taxes and Federal Deficit
Tax Freedom Day moves somewhat independently from an alternative calculation that adds the federal budget deficit to total taxes collected. In 2009, an unprecedented budget deficit over $1.5 trillion produces a date of May 29. This is the latest date in the year this deficit-inclusive measure has ever fallen. The only previous years when taxes and deficit spending comprised a similarly large share of national income were 1944 and 1945, at the peak of World War II. In the postwar era, this date had never fallen later than May 9 (in 1992). Figure 1 below shows Tax Freedom Day as traditionally presented and with the inclusion of the federal budget deficit, since 1967 (click to enlarge).
Tax Freedom Day Fluctuations in Recent Years and Predictions for the Near Future
In 2000, Tax Freedom Day was celebrated May 3, the latest date ever. A string of tax cuts between 2001 and 2003 pushed Tax Freedom Day up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004. For the next three years, incomes and tax collections soared, pushing Tax Freedom Day back to April 26 in 2007.
Since 2006, corporate tax revenues have fallen sharply and are projected to do so again in 2009. Personal income taxes also fell in 2008 and are expected to fall again in 2009 due to the weakening economy and tax cuts in the stimulus package. Because most of this year's stimulus package's tax cuts continue through 2010, Tax Freedom Day could be expected to shift later by a few days next year only if the economy improves. For 2011, both the stimulus package's tax cuts and the earlier Bush tax cuts of 2001 and 2003 are set to expire. The future timing of Tax Freedom Day will depend on which tax cuts Congress and the Obama Administration choose to extend through 2011 and thereafter.
Which Taxes Are the Biggest?
Five major categories of tax dominate the tax burden. Individual income taxes, both federal and state, require 38 days' work. Payroll taxes take another 27 days' work. Sales and excise taxes, mostly state and local, take 15 days to pay off. Corporate income taxes take 6 days, and property taxes take 12. Americans will log 4 more days to pay other miscellaneous taxes, most notably including motor vehicle license taxes and severance taxes, and about 1 day for estate taxes.
Tax Freedom Day by State
Residents of Alaska will bear the lowest average tax burden in 2009. Because of their modest incomes and extremely low state-and-local tax burden, we estimate Alaska's Tax Freedom Day for 2009 to be March 23. Louisiana, Mississippi, South Dakota and West Virginia round out the five states that we project will experience Tax Freedom Day earliest in 2009.
The residents of Connecticut will celebrate last, as usual, working until the 120th day of the year, from January 1 to April 30, before earning enough to pay all their taxes. Because Connecticut's income per capita is higher than in any other state, its residents pay extraordinarily high federal income taxes. Nearby states New Jersey and New York are second and third, respectively. California and Maryland round out the top five.
SOMEONE TO CHEER FOR!!
Curry invites cancer survivor to draft
--------------------------------------------------------------------------------
Associated Press
When Aaron Curry realized he'd be one of nine players invited to the NFL draft, he knew he'd put on an expensive suit and surround himself with his family on one of the biggest days of his life.
The Wake Forest linebacker wanted to do something unique, too.
Curry wound up at St. Jude Children's Research Hospital in Memphis, Tenn., on Monday. In a prearranged meeting set up by his agent and hospital officials, Curry told wide-eyed, 12-year-old Bryson Merriweather he wanted a tour of the place.
The boy had spent the better part of two years there undergoing five rounds of chemotherapy for leukemia, which is now in remission.
"We were acting like he was just taking me on a regular tour around the hospital," Curry said. "Toward the end we ended up outside tossing each other a football and I just started talking about the draft.
"He said he had seen it and I was telling him that I had been invited and if he would join me in this experience. So I said, 'So come to New York with me and get drafted into the NFL,'" he said.
So joining Curry's mother, fiancee and siblings at his draft table on April 25 will be Bryson, the Madison, Ala., boy who is determined to play football again -- and get more people to be bone marrow donors.
"I was showing him around and then he asked me," Bryson said of Curry's surprise offer. "And I've never been to New York before."
While Curry has been fortunate not to have a friend or family member affected by cancer, he was drawn to Bryson's story when he was directed to the St. Jude hospital through his agent, Andy Ross.
Bryson, who played tight end and defensive end for his youth team, first complained that his chest hurt after football practice in Oct. 2007. Later he said he couldn't catch his breath and it was thought he had asthma.
But a month after that his family was hit with horrible news: Bryson had acute myeloid leukemia and would need to go immediately by ambulance four hours away to St. Jude, a top pediatric cancer treatment hospital.
Aaron Curry was one of nine players invited to the draft.
Bryson began a grueling schedule of chemotherapy while his family searched in vain for a matching donor if he required a bone marrow transplant.
"It was disheartening to know that we didn't have a match," said his father, Lorace "Ace" Merriweather.
As Bryson got stronger, he helped lead bone marrow drives and fundraisers for St. Jude hospital in his hometown. His parents also decided to have another child.
Six months after Bryson went into remission, his mother, Becky, gave birth to Bryan in December. It was recently determined he's a genetic match with his older brother.
"If the cancer does come back, we now have a donor match in our own family," Bryson's father said. "That's been another amazing journey that we've gone through."
Now that journey will take Bryson and his dad to New York. Curry will meet them on Thursday and tour the city. They'll attend some events together on Friday, and Bryson will be there Saturday when Curry could be the No. 1 overall pick by Detroit.
"After meeting Bryson, I just think it was the perfect route to go," Curry said. "Bryson has already done some things in the community and he's only 12."
Statistics show that Bryson has a 30 to 40 percent chance of relapse and a cell mutation he has puts him in an even higher risk group. But the lanky Bryson is strong enough now to play sports again. He's running track this spring and hopes to resume football this fall.
He'll also have stories to tell his friends after experiencing the draft firsthand with a potential future NFL star.
"It's just been a blessing to go through this whole experience. It renewed our faith," Ace Merriweather said. "It also shows Bryson's courage and will to fight through this. He didn't ask for it, but he's taken on the challenge. I know he's going to have a long life ahead of him.
"Maybe one day we'll be at the draft inviting somebody," he said.
--------------------------------------------------------------------------------
Associated Press
When Aaron Curry realized he'd be one of nine players invited to the NFL draft, he knew he'd put on an expensive suit and surround himself with his family on one of the biggest days of his life.
The Wake Forest linebacker wanted to do something unique, too.
Curry wound up at St. Jude Children's Research Hospital in Memphis, Tenn., on Monday. In a prearranged meeting set up by his agent and hospital officials, Curry told wide-eyed, 12-year-old Bryson Merriweather he wanted a tour of the place.
The boy had spent the better part of two years there undergoing five rounds of chemotherapy for leukemia, which is now in remission.
"We were acting like he was just taking me on a regular tour around the hospital," Curry said. "Toward the end we ended up outside tossing each other a football and I just started talking about the draft.
"He said he had seen it and I was telling him that I had been invited and if he would join me in this experience. So I said, 'So come to New York with me and get drafted into the NFL,'" he said.
So joining Curry's mother, fiancee and siblings at his draft table on April 25 will be Bryson, the Madison, Ala., boy who is determined to play football again -- and get more people to be bone marrow donors.
"I was showing him around and then he asked me," Bryson said of Curry's surprise offer. "And I've never been to New York before."
While Curry has been fortunate not to have a friend or family member affected by cancer, he was drawn to Bryson's story when he was directed to the St. Jude hospital through his agent, Andy Ross.
Bryson, who played tight end and defensive end for his youth team, first complained that his chest hurt after football practice in Oct. 2007. Later he said he couldn't catch his breath and it was thought he had asthma.
But a month after that his family was hit with horrible news: Bryson had acute myeloid leukemia and would need to go immediately by ambulance four hours away to St. Jude, a top pediatric cancer treatment hospital.
Aaron Curry was one of nine players invited to the draft.
Bryson began a grueling schedule of chemotherapy while his family searched in vain for a matching donor if he required a bone marrow transplant.
"It was disheartening to know that we didn't have a match," said his father, Lorace "Ace" Merriweather.
As Bryson got stronger, he helped lead bone marrow drives and fundraisers for St. Jude hospital in his hometown. His parents also decided to have another child.
Six months after Bryson went into remission, his mother, Becky, gave birth to Bryan in December. It was recently determined he's a genetic match with his older brother.
"If the cancer does come back, we now have a donor match in our own family," Bryson's father said. "That's been another amazing journey that we've gone through."
Now that journey will take Bryson and his dad to New York. Curry will meet them on Thursday and tour the city. They'll attend some events together on Friday, and Bryson will be there Saturday when Curry could be the No. 1 overall pick by Detroit.
"After meeting Bryson, I just think it was the perfect route to go," Curry said. "Bryson has already done some things in the community and he's only 12."
Statistics show that Bryson has a 30 to 40 percent chance of relapse and a cell mutation he has puts him in an even higher risk group. But the lanky Bryson is strong enough now to play sports again. He's running track this spring and hopes to resume football this fall.
He'll also have stories to tell his friends after experiencing the draft firsthand with a potential future NFL star.
"It's just been a blessing to go through this whole experience. It renewed our faith," Ace Merriweather said. "It also shows Bryson's courage and will to fight through this. He didn't ask for it, but he's taken on the challenge. I know he's going to have a long life ahead of him.
"Maybe one day we'll be at the draft inviting somebody," he said.
FAIR & imBALANCED!!
For news coverage to be "fair and balanced," there has to be a line separating news and legitimate commentary from political activism and demagoguery.
Fox News Sunday host Chris Wallace has repeatedly characterized his network as "fair and balanced," and as one that should be taken seriously. However, several recent actions on Fox News illustrate that the network is contributing to a culture of conservative paranoia and anti-Obama political activism.
Recent events undermine the argument that Fox News should be treated as a credible, "fair and balanced" news outlet. For example, since launching his Fox News show, Glenn Beck, who has emerged as a prominent player in the network's lineup of weekday programs, has engaged in increasingly outrageous rhetoric that promotes a culture of conservative paranoia. His recent actions include:
Imitating President Obama pouring gasoline onto the "average American": On April 9, Beck responded to, among other things, reports that President Obama will pursue immigration reform by imitating Obama pouring gasoline onto the "average American." After lighting and extinguishing a match, Beck asked: "President Obama, why don't you just set us on fire?"
Mocking Obama's aunt's "limp": On April 2, Beck -- using a cane as a prop -- devoted large portions of a segment to mocking Obama's aunt's "limp."
Portraying Obama and Democrats as vampires: On March 30, Beck portrayed Obama and Democrats as vampires "going after the blood of our businesses" and suggested "driv[ing] a stake through the heart of the bloodsuckers."
Also, in recent weeks, Beck and Fox News have engaged in anti-Obama political activism through their aggressive promotion of the upcoming tea party protests, which the network has portrayed as a response to Obama's fiscal policies. In addition to repeatedly airing graphics describing the protests as "FNC TAX DAY TEA PARTIES," Fox News has run advertisements promoting them, listed information about the parties on its various websites, and aired graphics touting the date, time, location, and website of specific tea parties. And Fox News hosts such as Beck have encouraged viewers to attend the protests.
If Wallace wants to continue to portray his network and influential Sunday show as a credible source of news, he owes it to his viewers to speak out publicly against Fox News' recent behavior.
In the past, Wallace has criticized his Fox News colleagues when they have undermined his network's credibility. In March 2008, when he confronted the hosts of Fox & Friends for distorting Obama's words during what he described as "two hours of Obama bashing," he said that "one of the things that's great about Fox News is that we don't all follow talking points and we disagree about things." Following that incident, he said that "we really are, despite the sniffing or dismissals of our liberal critics, 'fair and balanced' at Fox News" and said that the news network does not "espouse" a "conservative point of view." The recent actions of his colleagues suggest otherwise.
If Wallace wants to repair the damage done to his network's credibility, he needs to speak out publicly against the recent political actions by his colleagues on Fox News.
Eric Burns
Media Matters for America
Fox News Sunday host Chris Wallace has repeatedly characterized his network as "fair and balanced," and as one that should be taken seriously. However, several recent actions on Fox News illustrate that the network is contributing to a culture of conservative paranoia and anti-Obama political activism.
Recent events undermine the argument that Fox News should be treated as a credible, "fair and balanced" news outlet. For example, since launching his Fox News show, Glenn Beck, who has emerged as a prominent player in the network's lineup of weekday programs, has engaged in increasingly outrageous rhetoric that promotes a culture of conservative paranoia. His recent actions include:
Imitating President Obama pouring gasoline onto the "average American": On April 9, Beck responded to, among other things, reports that President Obama will pursue immigration reform by imitating Obama pouring gasoline onto the "average American." After lighting and extinguishing a match, Beck asked: "President Obama, why don't you just set us on fire?"
Mocking Obama's aunt's "limp": On April 2, Beck -- using a cane as a prop -- devoted large portions of a segment to mocking Obama's aunt's "limp."
Portraying Obama and Democrats as vampires: On March 30, Beck portrayed Obama and Democrats as vampires "going after the blood of our businesses" and suggested "driv[ing] a stake through the heart of the bloodsuckers."
Also, in recent weeks, Beck and Fox News have engaged in anti-Obama political activism through their aggressive promotion of the upcoming tea party protests, which the network has portrayed as a response to Obama's fiscal policies. In addition to repeatedly airing graphics describing the protests as "FNC TAX DAY TEA PARTIES," Fox News has run advertisements promoting them, listed information about the parties on its various websites, and aired graphics touting the date, time, location, and website of specific tea parties. And Fox News hosts such as Beck have encouraged viewers to attend the protests.
If Wallace wants to continue to portray his network and influential Sunday show as a credible source of news, he owes it to his viewers to speak out publicly against Fox News' recent behavior.
In the past, Wallace has criticized his Fox News colleagues when they have undermined his network's credibility. In March 2008, when he confronted the hosts of Fox & Friends for distorting Obama's words during what he described as "two hours of Obama bashing," he said that "one of the things that's great about Fox News is that we don't all follow talking points and we disagree about things." Following that incident, he said that "we really are, despite the sniffing or dismissals of our liberal critics, 'fair and balanced' at Fox News" and said that the news network does not "espouse" a "conservative point of view." The recent actions of his colleagues suggest otherwise.
If Wallace wants to repair the damage done to his network's credibility, he needs to speak out publicly against the recent political actions by his colleagues on Fox News.
Eric Burns
Media Matters for America
Obama’s Remarks on the Economy 4-14/09
Obama’s Remarks on the Economy
Following are President Obama’s remarks on the economy at the Georgetown University, as provided by the White House.
It has now been twelve weeks since my administration began. And I think even our critics would agree that at the very least, we've been busy. In just under three months, we have responded to an extraordinary set of economic challenges with extraordinary action – action that has been unprecedented in both its scale and its speed.
I know that some have accused us of taking on too much at once. Others believe we haven't done enough. And many Americans are simply wondering how all of our different programs and policies fit together in a single, overarching strategy that will move this economy from recession to recovery and ultimately to prosperity.
So today, I want to step back for a moment and explain our strategy as clearly as I can. I want to talk about what we've done, why we've done it, and what we have left to do. I want to update you on the progress we've made, and be honest about the pitfalls that may lie ahead.
And most of all, I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America's future – a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation, and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations, and discoveries that will shape the 21st century. That is the America I see. That is the future I know we can have.
To understand how we get there, we first need to understand how we got here.
Recessions are not uncommon. Markets and economies naturally ebb and flow, as we have seen many times in our history. But this recession is different. This recession was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.
As has been widely reported, it started in the housing market. During the course of the decade, the formula for buying a house changed: instead of saving their pennies to buy their dream house, many Americans found they could take out loans that by traditional standards their incomes just could not support. Others were tricked into signing these subprime loans by lenders who were trying to make a quick profit. And the reason these loans were so readily available was that Wall Street saw big profits to be made. Investment banks would buy and package together these questionable mortgages into securities, arguing that by pooling the mortgages, the risks had been reduced. And credit agencies that are supposed to help investors determine the soundness of various investments stamped the securities with their safest rating when they should have been labeled "Buyer Beware."
No one really knew what the actual value of these securities were, but since the housing market was booming and prices were rising, banks and investors kept buying and selling them, always passing off the risk to someone else for a greater profit without having to take any of the responsibility. Banks took on more debt than they could handle. The government-chartered companies Fannie Mae and Freddie Mac, whose traditional mandate was to help support traditional mortgages, decided to get in on the action by buying and holding billions of dollars of these securities. AIG, the biggest insurer in the world, decided to make profits by selling billions of dollars of complicated financial instruments that supposedly insured these securities. Everybody was making record profits – except the wealth created was real only on paper. And as the bubble grew, there was almost no accountability or oversight from anyone in Washington.
Then the housing bubble burst. Home prices fell. People began defaulting on their subprime mortgages. The value of all those loans and securities plummeted. Banks and investors couldn't find anyone to buy them. Greed gave way to fear. Investors pulled their money out of the market. Large financial institutions that didn't have enough money on hand to pay off all their obligations collapsed. Other banks held on tight to the money they did have and simply stopped lending.
This is when the crisis spread from Wall Street to Main Street. After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to a college education. It's how stores stock their shelves, farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers. When laid off workers had less money to spend, businesses were forced to lay off even more workers. When people couldn't get car loans, a bad situation at the auto companies became even worse. When people couldn't get home loans, the crisis in the housing market only deepened. Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global. And when other nations can't afford to buy our goods, it slows our economy even further.
This is the situation we confronted on the day we took office. And so our most urgent task has been to clear away the wreckage, repair the immediate damage to the economy, and do everything we can to prevent a larger collapse. And since the problems we face are all working off each other to feed a vicious economic downturn, we've had no choice but to attack all fronts of our economic crisis at once.
The first step was to fight a severe shortage of demand in the economy. The Federal Reserve did this by dramatically lowering interest rates last year in order to boost investment. And my administration and Congress boosted demand by passing the largest recovery plan in our nation's history. It's a plan that is already in the process of saving or creating 3.5 million jobs over the next two years. It is putting money directly in people's pockets with a tax cut for 95% of working families that is now showing up in paychecks across America. And to cushion the blow of this recession, we also provided extended unemployment benefits and continued health care coverage to Americans who have lost their jobs through no fault of their own.
Now, some have argued that this recovery plan is a case of irresponsible government spending; that it is somehow to blame for our long-term deficit projections, and that the federal government should be cutting instead of increasing spending right now. So let me tackle this argument head on.
To begin with, economists on both the left and right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around their kitchen table and tried to figure out where they could cut back. So do many businesses. That is a completely responsible and understandable reaction. But if every family in America cuts back, then no one is spending any money, which means there are more layoffs, and the economy gets even worse. That's why the government has to step in and temporarily boost spending in order to stimulate demand. And that's exactly what we're doing right now.
Second of all, I absolutely agree that our long-term deficit is a major problem that we have to fix. But the fact is that this recovery plan represents only a tiny fraction of that long-term deficit. As I will discuss in a moment, the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs – not to stand idly by as the economy goes into free fall.
So the recovery plan has been the first step in confronting this economic crisis. The second step has been to heal our financial system so that credit is once again flowing to the businesses and families who rely on it.
The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money. In a climate of fear, banks were unable to replace their losses by raising new capital on their own, and they were unwilling to lend the money they did have because they were afraid that no one would pay it back. It is for this reason that the last administration used the Troubled Asset Relief Program, or TARP, to provide these banks with temporary financial assistance in order to get them lending again.
Now, I don't agree with some of the ways the TARP program was managed, but I do agree with the broader rationale that we must provide banks with the capital and the confidence necessary to start lending again. That is the purpose of the stress tests that will soon tell us how much additional capital will be needed to support lending at our largest banks. Ideally, these needs will be met by private investors. But where this is not possible, and banks require substantial additional resources from the government, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.
Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months – years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action. And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – "where's our bailout?," they ask – the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.
On the other hand, there have been some who don't dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear – the reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks, and it's certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.
Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm. So rest assured – we will do whatever is necessary to get credit flowing again, but we will do so in ways that minimize risks to taxpayers and to the broader economy. To that end, in addition to the program to provide capital to the banks, we have launched a plan that will pair government resources with private investment in order to clear away the old loans and securities – the so-called toxic assets – that are also preventing our banks from lending money.
Now, what we've also learned during this crisis is that our banks aren't the only institutions affected by these toxic assets that are clogging the financial system. A.I.G., for example, is not a bank. And yet because it chose to insure trillions of dollars worth of risky assets, its failure could threaten the entire financial system and freeze lending even further. This is why, as frustrating as it is – and I promise you, nobody is more frustrated than me – we've had to provide support for A.I.G. It's also why we need new legal authority so that we have the power to intervene in such financial institutions, just like a bankruptcy court does with businesses that hit hard times, so that we can restructure these businesses in an orderly way that does not induce panic – and can restructure inappropriate bonus contracts without creating a perception that government can just change compensation rules on a whim.
This is also why we're moving aggressively to unfreeze markets and jumpstart lending outside the banking system, where more than half of all lending in America actually takes place. To do this, we've started a program that will increase guarantees for small business loans and unlock the market for auto loans and student loans. And to stabilize the housing market, we've launched a plan that will save up to four million responsible homeowners from foreclosure and help many millions more re-finance.
In a few weeks, we will also reassess the state of Chrysler and General Motors, two companies with an important place in our history and a large footprint in our economy – but two companies that have also fallen on hard times.
Late last year, the companies were given transitional loans by the previous administration to tide them over as they worked to develop viable business plans. But the plans they developed fell short, and so we have given them some additional time to work these complex issues through. We owed that, not to the executives whose bad bets contributed to the weakening of their companies, but to the hundreds of thousands of workers whose livelihoods hang in the balance.
It is our fervent hope that in the coming weeks, Chrysler will find a viable business partner and that GM will develop a business plan that will put it on a path to profitability without endless support from the American taxpayer. In the meantime, we are taking steps to spur demand for American cars and provide relief to autoworkers and their communities. And we will continue to reaffirm this nation's commitment to a 21st century American auto industry that creates new jobs and builds the fuel-efficient cars and trucks that will carry us toward a clean energy future.
Finally, to coordinate a global response to this global recession, I went to the meeting of the G20 nations in London the other week. Each nation has undertaken significant stimulus to spur demand. All agreed to pursue tougher regulatory reforms. We also agreed to triple the lending capacity of the International Monetary Fund, an international financial institution supported by all the major economies, and provide direct assistance to developing nations and vulnerable populations – because America's success depends on whether other nations have the ability to buy what we sell. We pledged to avoid the trade barriers and protectionism that hurts us all in the end. And we decided to meet again in the fall to gauge our progress and take additional steps if necessary.
So all of these actions – the Recovery Act, the bank capitalization program, the housing plan, the strengthening of the non-bank credit market, the auto plan, and our work at the G20 – have been necessary pieces of the recovery puzzle. They have been designed to increase aggregate demand, get credit flowing again to families and businesses, and help them ride out the storm. And taken together, these actions are starting to generate signs of economic progress. Because of our recovery plan, schools and police departments have cancelled planned layoffs. Clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways. Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically-low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. Our program to support the market for auto loans and student loans has started to unfreeze this market and securitize more of this lending in the last few weeks. And small businesses are seeing a jump in loan activity for the first time in months.
This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America's economy. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends. The market will continue to rise and fall. Credit is still not flowing nearly as easily as it should. The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices. All of this means that there is much more work to be done. And all of this means that you can continue to expect an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts.
But even as we continue to clear away the wreckage and address the immediate crisis, it is my firm belief that our next task is to make sure such a crisis never happens again. Even as we clean up balance sheets and get credit flowing; even as people start spending and business start hiring – we have to realize that we cannot go back to the bubble and bust economy that led us to this point.
It is simply not sustainable to have a 21st century financial system that is governed by 20th century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed out credit cards, overleveraged banks and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen their income decline by nearly $2,000.
For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we're passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century.
There is a parable at the end of the Sermon on the Mount that tells the story of two men. The first built his house on a pile of sand, and it was destroyed as soon as the storm hit. But the second is known as the wise man, for when "…the rain descended, and the floods came, and the winds blew, and beat upon that house…it fell not: for it was founded upon a rock."
We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.
It's a foundation built upon five pillars that will grow our economy and make this new century another American century: new rules for Wall Street that will reward drive and innovation; new investments in education that will make our workforce more skilled and competitive; new investments in renewable energy and technology that will create new jobs and industries; new investments in health care that will cut costs for families and businesses; and new savings in our federal budget that will bring down the debt for future generations. That is the new foundation we must build. That must be our future – and my Administration's policies are designed to achieve that future.
The first step we will take to build this foundation is to reform the outdated rules and regulations that allowed this crisis to happen in the first place. It is time to lay down tough new rules of the road for Wall Street to ensure that we never find ourselves here again. Rules that punish short-cuts and abuse. Rules that tie someone's pay to their actual job performance. Rules that protect typical American families when they buy a home, get a credit card or invest in a 401k. We have already begun to work with Congress to shape this new regulatory framework – and I expect a bill to arrive on my desk for signature before the year is out.
The second pillar of this new foundation is an education system that finally prepares our workers for a 21st century economy. In the 20th century, the GI Bill sent a generation to college, and for decades, we led the world in education and economic growth. But in this new economy, we trail the world's leaders in graduation rates and achievement. That is why we have set a goal that will greatly enhance our ability to compete for the high-wage, high-tech jobs of the 21st century: by 2020, America will once more have the highest proportion of college graduates in the world.
To meet that goal, we have already dramatically expanded early childhood education. We are investing in innovative programs that have proven to help schools meet high standards and close achievement gaps. We are creating new rewards tied to teacher performance and new pathways for advancement. I have asked every American to commit to at least one year or more of higher education or career training, and we have provided tax credits to make a college education more affordable for every American.
The third pillar of this new foundation is to harness the renewable energy that can create millions of new jobs and new industries. We all know that the country that harnesses this energy will lead the 21st century. Yet we have allowed other countries to outpace us on this race to the future.
Well, I do not accept a future where the jobs and industries of tomorrow take root beyond our borders. It is time for America to lead again.
The investments we made in the Recovery Act will double this nation's supply of renewable energy in the next three years. And we are putting Americans to work making our homes and buildings more efficient so that we can save billions on our energy bills and grow our economy at the same time.
But the only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy. Some have argued that we shouldn't attempt such a transition until the economy recovers, and they are right that we have to take the costs of transition into account. But we can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we'll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars. Investors will put some money into a new energy technology, and a small business will open to start selling it. That's how we can grow this economy, enhance our security, and protect our planet at the same time.
The fourth pillar of the new foundation is a 21st century health care system where families, businesses, and government budgets aren't dragged down by skyrocketing insurance premiums.
One and a half million Americans could lose their homes this year just because of a medical crisis. Major American corporations are struggling to compete with their foreign counterparts, and small businesses are closing their doors. We cannot allow the cost of health care to strangle our economy any longer.
That's why our Recovery Act will invest in electronic health records with strict privacy standards that will save money and lives. We've also made the largest investment ever in preventive care, because that is one of the best ways to keep costs under control. And included in the budgets that just passed Congress is an historic commitment to reform that will finally make quality health care affordable for every American. So I look forward to working with both parties in Congress to make this reform a reality in the coming months.
Fixing our health care system will certainly require resources, but in my budget, we've made a commitment to fully pay for reform without increasing the deficit, and we've identified specific savings that will make the health care system more efficient and reduce costs for us all.
In fact, we have undertaken an unprecedented effort to find this kind of savings in every corner of the budget, because the final pillar in building our new foundation is restoring fiscal discipline once this economy recovers. Already, we have identified two trillion dollars in deficit-reductions over the next decade. We have announced procurement reform that will greatly reduce no-bid contracts and save the government $40 billion. Secretary Gates recently announced a courageous set of reforms that go right at the hundreds of billions of dollars in waste and cost overruns that have bloated our defense budget without making America safer. We will end education programs that don't work, and root out waste, fraud, and abuse in our Medicare program.
Altogether, this budget will reduce discretionary spending for domestic programs as share of the economy by more than 10% over the next decade to the lowest level since we began keeping records nearly half a century ago. And as we continue to go through the federal budget line by line, we will be announcing additional savings, secured by eliminating and consolidating programs we don't need so that we can make room for the things we do need.
Now, I realize that for some, this isn't enough. I know there is a criticism out there that my administration has somehow been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children's future.
Well let me make three points.
First, as I said earlier, the worst thing that we could do in a recession this severe is to try to cut government spending at the same time as families and businesses around the world are cutting back on their spending. So as serious as our deficit and debt problems are – and they are very serious – major efforts to deal with them have to focus on the medium and long-term budget picture.
Second, in tackling the deficit issue, we simply cannot sacrifice the long-term investments that we so desperately need to generate long-term prosperity. Just as a cash-strapped family may cut back on luxuries but will insist on spending money to get their children through college, so we as a country have to make current choices with an eye on the future. If we don't invest now in renewable energy or a skilled workforce or a more affordable health care system, this economy simply won't grow at the pace it needs to in two or five or ten years down the road. If we don't lay this new foundation, it won't be long before we are right back where we are today. And I can assure you that chronically slow growth will not help our long-term budget situation.
Third, the problem with our deficit and debt is not new. It has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs. This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as Baby Boomers age, and will in fact lead us down an unsustainable path. But let's not kid ourselves and suggest that we can do it by trimming a few earmarks or cutting the budget for the National Endowment for the Arts. Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year. So if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform.
Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid. Make no mistake: health care reform is entitlement reform. That's not just my opinion – that was the conclusion of a wide range of participants at the Fiscal Responsibility Summit we held at the White House in February, and that's one of the reasons why I firmly believe we need to get health care reform done this year.
Once we tackle rising health care costs, we must also work to put Social Security on firmer footing. It is time for both parties to come together and find a way to keep the promise of a sound retirement for future generations. And we should restore a sense of fairness and balance to our tax code by shutting down corporate loopholes and ensuring that everyone pays what they owe.
All of these efforts will require tough choices and compromises. But the difficulties can't serve as an excuse for inaction. Not anymore.
This brings up one final point I'd like to make today. I've talked a lot about the fundamental weakness in our economy that led us to this day of reckoning. But we also arrived here because of a fundamental weakness in our political system.
For too long, too many in Washington put off hard decisions for some other time on some other day. There's been a tendency to score political points instead of rolling up sleeves to solve real problems. There is also an impatience that characterizes this town – an attention span that has only grown shorter with the twenty-four hour news cycle, and insists on instant gratification in the form of immediate results or higher poll numbers. When a crisis hits, there's all too often a lurch from shock to trance, with everyone responding to the tempest of the moment until the furor has died away and the media coverage has moved on, instead of confronting the major challenges that will shape our future in a sustained and focused way.
This can't be one of those times. The challenges are too great. The stakes are too high. I know how difficult it is for Members of Congress in both parties to grapple with some of the big decisions we face right now. It's more than most congresses and most presidents have to deal with in a lifetime.
But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility – to ourselves, to the men and women who sent us here, and to the many generations whose lives will be affected for good or for ill because of what we do here.
There is no doubt that times are still tough. By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America's future that is far different than our troubled economic past. It's an America teeming with new industry and commerce; humming with new energy and discoveries that light the world once more. A place where anyone from anywhere with a good idea or the will to work can live the dream they've heard so much about.
It is that house upon the rock. Proud, sturdy, and unwavering in the face of the greatest storm. We will not finish it in one year or even many, but if we use this moment to lay that new foundation; if we come together and begin the hard work of rebuilding; if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time. Thank you, God Bless you, and may God Bless the United States of America.
Following are President Obama’s remarks on the economy at the Georgetown University, as provided by the White House.
It has now been twelve weeks since my administration began. And I think even our critics would agree that at the very least, we've been busy. In just under three months, we have responded to an extraordinary set of economic challenges with extraordinary action – action that has been unprecedented in both its scale and its speed.
I know that some have accused us of taking on too much at once. Others believe we haven't done enough. And many Americans are simply wondering how all of our different programs and policies fit together in a single, overarching strategy that will move this economy from recession to recovery and ultimately to prosperity.
So today, I want to step back for a moment and explain our strategy as clearly as I can. I want to talk about what we've done, why we've done it, and what we have left to do. I want to update you on the progress we've made, and be honest about the pitfalls that may lie ahead.
And most of all, I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America's future – a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation, and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations, and discoveries that will shape the 21st century. That is the America I see. That is the future I know we can have.
To understand how we get there, we first need to understand how we got here.
Recessions are not uncommon. Markets and economies naturally ebb and flow, as we have seen many times in our history. But this recession is different. This recession was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.
As has been widely reported, it started in the housing market. During the course of the decade, the formula for buying a house changed: instead of saving their pennies to buy their dream house, many Americans found they could take out loans that by traditional standards their incomes just could not support. Others were tricked into signing these subprime loans by lenders who were trying to make a quick profit. And the reason these loans were so readily available was that Wall Street saw big profits to be made. Investment banks would buy and package together these questionable mortgages into securities, arguing that by pooling the mortgages, the risks had been reduced. And credit agencies that are supposed to help investors determine the soundness of various investments stamped the securities with their safest rating when they should have been labeled "Buyer Beware."
No one really knew what the actual value of these securities were, but since the housing market was booming and prices were rising, banks and investors kept buying and selling them, always passing off the risk to someone else for a greater profit without having to take any of the responsibility. Banks took on more debt than they could handle. The government-chartered companies Fannie Mae and Freddie Mac, whose traditional mandate was to help support traditional mortgages, decided to get in on the action by buying and holding billions of dollars of these securities. AIG, the biggest insurer in the world, decided to make profits by selling billions of dollars of complicated financial instruments that supposedly insured these securities. Everybody was making record profits – except the wealth created was real only on paper. And as the bubble grew, there was almost no accountability or oversight from anyone in Washington.
Then the housing bubble burst. Home prices fell. People began defaulting on their subprime mortgages. The value of all those loans and securities plummeted. Banks and investors couldn't find anyone to buy them. Greed gave way to fear. Investors pulled their money out of the market. Large financial institutions that didn't have enough money on hand to pay off all their obligations collapsed. Other banks held on tight to the money they did have and simply stopped lending.
This is when the crisis spread from Wall Street to Main Street. After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to a college education. It's how stores stock their shelves, farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers. When laid off workers had less money to spend, businesses were forced to lay off even more workers. When people couldn't get car loans, a bad situation at the auto companies became even worse. When people couldn't get home loans, the crisis in the housing market only deepened. Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global. And when other nations can't afford to buy our goods, it slows our economy even further.
This is the situation we confronted on the day we took office. And so our most urgent task has been to clear away the wreckage, repair the immediate damage to the economy, and do everything we can to prevent a larger collapse. And since the problems we face are all working off each other to feed a vicious economic downturn, we've had no choice but to attack all fronts of our economic crisis at once.
The first step was to fight a severe shortage of demand in the economy. The Federal Reserve did this by dramatically lowering interest rates last year in order to boost investment. And my administration and Congress boosted demand by passing the largest recovery plan in our nation's history. It's a plan that is already in the process of saving or creating 3.5 million jobs over the next two years. It is putting money directly in people's pockets with a tax cut for 95% of working families that is now showing up in paychecks across America. And to cushion the blow of this recession, we also provided extended unemployment benefits and continued health care coverage to Americans who have lost their jobs through no fault of their own.
Now, some have argued that this recovery plan is a case of irresponsible government spending; that it is somehow to blame for our long-term deficit projections, and that the federal government should be cutting instead of increasing spending right now. So let me tackle this argument head on.
To begin with, economists on both the left and right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around their kitchen table and tried to figure out where they could cut back. So do many businesses. That is a completely responsible and understandable reaction. But if every family in America cuts back, then no one is spending any money, which means there are more layoffs, and the economy gets even worse. That's why the government has to step in and temporarily boost spending in order to stimulate demand. And that's exactly what we're doing right now.
Second of all, I absolutely agree that our long-term deficit is a major problem that we have to fix. But the fact is that this recovery plan represents only a tiny fraction of that long-term deficit. As I will discuss in a moment, the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs – not to stand idly by as the economy goes into free fall.
So the recovery plan has been the first step in confronting this economic crisis. The second step has been to heal our financial system so that credit is once again flowing to the businesses and families who rely on it.
The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money. In a climate of fear, banks were unable to replace their losses by raising new capital on their own, and they were unwilling to lend the money they did have because they were afraid that no one would pay it back. It is for this reason that the last administration used the Troubled Asset Relief Program, or TARP, to provide these banks with temporary financial assistance in order to get them lending again.
Now, I don't agree with some of the ways the TARP program was managed, but I do agree with the broader rationale that we must provide banks with the capital and the confidence necessary to start lending again. That is the purpose of the stress tests that will soon tell us how much additional capital will be needed to support lending at our largest banks. Ideally, these needs will be met by private investors. But where this is not possible, and banks require substantial additional resources from the government, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.
Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months – years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action. And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – "where's our bailout?," they ask – the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.
On the other hand, there have been some who don't dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear – the reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks, and it's certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.
Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm. So rest assured – we will do whatever is necessary to get credit flowing again, but we will do so in ways that minimize risks to taxpayers and to the broader economy. To that end, in addition to the program to provide capital to the banks, we have launched a plan that will pair government resources with private investment in order to clear away the old loans and securities – the so-called toxic assets – that are also preventing our banks from lending money.
Now, what we've also learned during this crisis is that our banks aren't the only institutions affected by these toxic assets that are clogging the financial system. A.I.G., for example, is not a bank. And yet because it chose to insure trillions of dollars worth of risky assets, its failure could threaten the entire financial system and freeze lending even further. This is why, as frustrating as it is – and I promise you, nobody is more frustrated than me – we've had to provide support for A.I.G. It's also why we need new legal authority so that we have the power to intervene in such financial institutions, just like a bankruptcy court does with businesses that hit hard times, so that we can restructure these businesses in an orderly way that does not induce panic – and can restructure inappropriate bonus contracts without creating a perception that government can just change compensation rules on a whim.
This is also why we're moving aggressively to unfreeze markets and jumpstart lending outside the banking system, where more than half of all lending in America actually takes place. To do this, we've started a program that will increase guarantees for small business loans and unlock the market for auto loans and student loans. And to stabilize the housing market, we've launched a plan that will save up to four million responsible homeowners from foreclosure and help many millions more re-finance.
In a few weeks, we will also reassess the state of Chrysler and General Motors, two companies with an important place in our history and a large footprint in our economy – but two companies that have also fallen on hard times.
Late last year, the companies were given transitional loans by the previous administration to tide them over as they worked to develop viable business plans. But the plans they developed fell short, and so we have given them some additional time to work these complex issues through. We owed that, not to the executives whose bad bets contributed to the weakening of their companies, but to the hundreds of thousands of workers whose livelihoods hang in the balance.
It is our fervent hope that in the coming weeks, Chrysler will find a viable business partner and that GM will develop a business plan that will put it on a path to profitability without endless support from the American taxpayer. In the meantime, we are taking steps to spur demand for American cars and provide relief to autoworkers and their communities. And we will continue to reaffirm this nation's commitment to a 21st century American auto industry that creates new jobs and builds the fuel-efficient cars and trucks that will carry us toward a clean energy future.
Finally, to coordinate a global response to this global recession, I went to the meeting of the G20 nations in London the other week. Each nation has undertaken significant stimulus to spur demand. All agreed to pursue tougher regulatory reforms. We also agreed to triple the lending capacity of the International Monetary Fund, an international financial institution supported by all the major economies, and provide direct assistance to developing nations and vulnerable populations – because America's success depends on whether other nations have the ability to buy what we sell. We pledged to avoid the trade barriers and protectionism that hurts us all in the end. And we decided to meet again in the fall to gauge our progress and take additional steps if necessary.
So all of these actions – the Recovery Act, the bank capitalization program, the housing plan, the strengthening of the non-bank credit market, the auto plan, and our work at the G20 – have been necessary pieces of the recovery puzzle. They have been designed to increase aggregate demand, get credit flowing again to families and businesses, and help them ride out the storm. And taken together, these actions are starting to generate signs of economic progress. Because of our recovery plan, schools and police departments have cancelled planned layoffs. Clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways. Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically-low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. Our program to support the market for auto loans and student loans has started to unfreeze this market and securitize more of this lending in the last few weeks. And small businesses are seeing a jump in loan activity for the first time in months.
This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America's economy. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends. The market will continue to rise and fall. Credit is still not flowing nearly as easily as it should. The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices. All of this means that there is much more work to be done. And all of this means that you can continue to expect an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts.
But even as we continue to clear away the wreckage and address the immediate crisis, it is my firm belief that our next task is to make sure such a crisis never happens again. Even as we clean up balance sheets and get credit flowing; even as people start spending and business start hiring – we have to realize that we cannot go back to the bubble and bust economy that led us to this point.
It is simply not sustainable to have a 21st century financial system that is governed by 20th century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed out credit cards, overleveraged banks and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen their income decline by nearly $2,000.
For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we're passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century.
There is a parable at the end of the Sermon on the Mount that tells the story of two men. The first built his house on a pile of sand, and it was destroyed as soon as the storm hit. But the second is known as the wise man, for when "…the rain descended, and the floods came, and the winds blew, and beat upon that house…it fell not: for it was founded upon a rock."
We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.
It's a foundation built upon five pillars that will grow our economy and make this new century another American century: new rules for Wall Street that will reward drive and innovation; new investments in education that will make our workforce more skilled and competitive; new investments in renewable energy and technology that will create new jobs and industries; new investments in health care that will cut costs for families and businesses; and new savings in our federal budget that will bring down the debt for future generations. That is the new foundation we must build. That must be our future – and my Administration's policies are designed to achieve that future.
The first step we will take to build this foundation is to reform the outdated rules and regulations that allowed this crisis to happen in the first place. It is time to lay down tough new rules of the road for Wall Street to ensure that we never find ourselves here again. Rules that punish short-cuts and abuse. Rules that tie someone's pay to their actual job performance. Rules that protect typical American families when they buy a home, get a credit card or invest in a 401k. We have already begun to work with Congress to shape this new regulatory framework – and I expect a bill to arrive on my desk for signature before the year is out.
The second pillar of this new foundation is an education system that finally prepares our workers for a 21st century economy. In the 20th century, the GI Bill sent a generation to college, and for decades, we led the world in education and economic growth. But in this new economy, we trail the world's leaders in graduation rates and achievement. That is why we have set a goal that will greatly enhance our ability to compete for the high-wage, high-tech jobs of the 21st century: by 2020, America will once more have the highest proportion of college graduates in the world.
To meet that goal, we have already dramatically expanded early childhood education. We are investing in innovative programs that have proven to help schools meet high standards and close achievement gaps. We are creating new rewards tied to teacher performance and new pathways for advancement. I have asked every American to commit to at least one year or more of higher education or career training, and we have provided tax credits to make a college education more affordable for every American.
The third pillar of this new foundation is to harness the renewable energy that can create millions of new jobs and new industries. We all know that the country that harnesses this energy will lead the 21st century. Yet we have allowed other countries to outpace us on this race to the future.
Well, I do not accept a future where the jobs and industries of tomorrow take root beyond our borders. It is time for America to lead again.
The investments we made in the Recovery Act will double this nation's supply of renewable energy in the next three years. And we are putting Americans to work making our homes and buildings more efficient so that we can save billions on our energy bills and grow our economy at the same time.
But the only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy. Some have argued that we shouldn't attempt such a transition until the economy recovers, and they are right that we have to take the costs of transition into account. But we can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we'll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars. Investors will put some money into a new energy technology, and a small business will open to start selling it. That's how we can grow this economy, enhance our security, and protect our planet at the same time.
The fourth pillar of the new foundation is a 21st century health care system where families, businesses, and government budgets aren't dragged down by skyrocketing insurance premiums.
One and a half million Americans could lose their homes this year just because of a medical crisis. Major American corporations are struggling to compete with their foreign counterparts, and small businesses are closing their doors. We cannot allow the cost of health care to strangle our economy any longer.
That's why our Recovery Act will invest in electronic health records with strict privacy standards that will save money and lives. We've also made the largest investment ever in preventive care, because that is one of the best ways to keep costs under control. And included in the budgets that just passed Congress is an historic commitment to reform that will finally make quality health care affordable for every American. So I look forward to working with both parties in Congress to make this reform a reality in the coming months.
Fixing our health care system will certainly require resources, but in my budget, we've made a commitment to fully pay for reform without increasing the deficit, and we've identified specific savings that will make the health care system more efficient and reduce costs for us all.
In fact, we have undertaken an unprecedented effort to find this kind of savings in every corner of the budget, because the final pillar in building our new foundation is restoring fiscal discipline once this economy recovers. Already, we have identified two trillion dollars in deficit-reductions over the next decade. We have announced procurement reform that will greatly reduce no-bid contracts and save the government $40 billion. Secretary Gates recently announced a courageous set of reforms that go right at the hundreds of billions of dollars in waste and cost overruns that have bloated our defense budget without making America safer. We will end education programs that don't work, and root out waste, fraud, and abuse in our Medicare program.
Altogether, this budget will reduce discretionary spending for domestic programs as share of the economy by more than 10% over the next decade to the lowest level since we began keeping records nearly half a century ago. And as we continue to go through the federal budget line by line, we will be announcing additional savings, secured by eliminating and consolidating programs we don't need so that we can make room for the things we do need.
Now, I realize that for some, this isn't enough. I know there is a criticism out there that my administration has somehow been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children's future.
Well let me make three points.
First, as I said earlier, the worst thing that we could do in a recession this severe is to try to cut government spending at the same time as families and businesses around the world are cutting back on their spending. So as serious as our deficit and debt problems are – and they are very serious – major efforts to deal with them have to focus on the medium and long-term budget picture.
Second, in tackling the deficit issue, we simply cannot sacrifice the long-term investments that we so desperately need to generate long-term prosperity. Just as a cash-strapped family may cut back on luxuries but will insist on spending money to get their children through college, so we as a country have to make current choices with an eye on the future. If we don't invest now in renewable energy or a skilled workforce or a more affordable health care system, this economy simply won't grow at the pace it needs to in two or five or ten years down the road. If we don't lay this new foundation, it won't be long before we are right back where we are today. And I can assure you that chronically slow growth will not help our long-term budget situation.
Third, the problem with our deficit and debt is not new. It has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs. This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as Baby Boomers age, and will in fact lead us down an unsustainable path. But let's not kid ourselves and suggest that we can do it by trimming a few earmarks or cutting the budget for the National Endowment for the Arts. Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year. So if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform.
Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid. Make no mistake: health care reform is entitlement reform. That's not just my opinion – that was the conclusion of a wide range of participants at the Fiscal Responsibility Summit we held at the White House in February, and that's one of the reasons why I firmly believe we need to get health care reform done this year.
Once we tackle rising health care costs, we must also work to put Social Security on firmer footing. It is time for both parties to come together and find a way to keep the promise of a sound retirement for future generations. And we should restore a sense of fairness and balance to our tax code by shutting down corporate loopholes and ensuring that everyone pays what they owe.
All of these efforts will require tough choices and compromises. But the difficulties can't serve as an excuse for inaction. Not anymore.
This brings up one final point I'd like to make today. I've talked a lot about the fundamental weakness in our economy that led us to this day of reckoning. But we also arrived here because of a fundamental weakness in our political system.
For too long, too many in Washington put off hard decisions for some other time on some other day. There's been a tendency to score political points instead of rolling up sleeves to solve real problems. There is also an impatience that characterizes this town – an attention span that has only grown shorter with the twenty-four hour news cycle, and insists on instant gratification in the form of immediate results or higher poll numbers. When a crisis hits, there's all too often a lurch from shock to trance, with everyone responding to the tempest of the moment until the furor has died away and the media coverage has moved on, instead of confronting the major challenges that will shape our future in a sustained and focused way.
This can't be one of those times. The challenges are too great. The stakes are too high. I know how difficult it is for Members of Congress in both parties to grapple with some of the big decisions we face right now. It's more than most congresses and most presidents have to deal with in a lifetime.
But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility – to ourselves, to the men and women who sent us here, and to the many generations whose lives will be affected for good or for ill because of what we do here.
There is no doubt that times are still tough. By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America's future that is far different than our troubled economic past. It's an America teeming with new industry and commerce; humming with new energy and discoveries that light the world once more. A place where anyone from anywhere with a good idea or the will to work can live the dream they've heard so much about.
It is that house upon the rock. Proud, sturdy, and unwavering in the face of the greatest storm. We will not finish it in one year or even many, but if we use this moment to lay that new foundation; if we come together and begin the hard work of rebuilding; if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time. Thank you, God Bless you, and may God Bless the United States of America.
B O explains so you can understand!
Obama Sees More Pain Now but Hope Later on Economy
By DAVID STOUT
WASHINGTON — President Obama said on Tuesday that the battered economy was showing signs of recovery, but he warned Americans that more pain lies ahead and urged them to help build a foundation for a new, 21st century prosperity.
Speaking just after a disappointing report on March retail sales made it clear that a sustained recovery is not yet at hand, the president delivered a speech that was part pep talk and part rebuke, not only for the once high-rolling members of the financial world but for politicians whom he said had deferred tough decisions for too long.
“I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America’s future,” Mr. Obama said in remarks at Georgetown University.
The president envisioned “a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations and discoveries that will shape the 21st century.”
“That is the future I see. That is the future I know we can have.”
But the near future will bring “more job loss, more foreclosures and more pain before it ends,” Mr. Obama said. Underscoring his point was a Commerce Department report showing that consumer spending on a wide array of goods declined in March, reflecting a general spirit of uncertainty as well as continuing job losses.
The president said, as he has repeatedly, that the recently enacted stimulus plan, the efforts to strengthen the banking system and attempts to rescue the flagging American auto industry have all borne fruit, demonstrated in part by an increase in home-mortgage refinancings and more lending by small businesses.
“This is all welcome and encouraging news, but it does not mean that hard times are over,” Mr. Obama said, warning that 2009 will be a difficult year, and that no one should expect a return to full prosperity soon.
As the president spoke, the Federal Reserve Chairman Ben S. Bernanke told an audience at Morehouse College in Atlanta that there were “tentative signs” that the decline in the economy was slowing.
President Obama called on Americans to take the long view. “There is no doubt that times are still tough,” he said. “By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.”
Realizing that vision will require a new regulatory structure, one based on 21st century needs rather than an outdated financial buccaneer ethic, the president said. It will also require work on deep, complicated issues like health care and energy, he said.
Mr. Obama said he saw a new America whose foundations are not built on sand but on rock, “proud, sturdy and unwavering in the face of the greatest storm.”
“We will not finish it in one year or even many,” he said, “but if we use this moment to lay that new foundation, if we come together and begin the hard work of rebuilding, if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time.”
By DAVID STOUT
WASHINGTON — President Obama said on Tuesday that the battered economy was showing signs of recovery, but he warned Americans that more pain lies ahead and urged them to help build a foundation for a new, 21st century prosperity.
Speaking just after a disappointing report on March retail sales made it clear that a sustained recovery is not yet at hand, the president delivered a speech that was part pep talk and part rebuke, not only for the once high-rolling members of the financial world but for politicians whom he said had deferred tough decisions for too long.
“I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America’s future,” Mr. Obama said in remarks at Georgetown University.
The president envisioned “a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations and discoveries that will shape the 21st century.”
“That is the future I see. That is the future I know we can have.”
But the near future will bring “more job loss, more foreclosures and more pain before it ends,” Mr. Obama said. Underscoring his point was a Commerce Department report showing that consumer spending on a wide array of goods declined in March, reflecting a general spirit of uncertainty as well as continuing job losses.
The president said, as he has repeatedly, that the recently enacted stimulus plan, the efforts to strengthen the banking system and attempts to rescue the flagging American auto industry have all borne fruit, demonstrated in part by an increase in home-mortgage refinancings and more lending by small businesses.
“This is all welcome and encouraging news, but it does not mean that hard times are over,” Mr. Obama said, warning that 2009 will be a difficult year, and that no one should expect a return to full prosperity soon.
As the president spoke, the Federal Reserve Chairman Ben S. Bernanke told an audience at Morehouse College in Atlanta that there were “tentative signs” that the decline in the economy was slowing.
President Obama called on Americans to take the long view. “There is no doubt that times are still tough,” he said. “By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.”
Realizing that vision will require a new regulatory structure, one based on 21st century needs rather than an outdated financial buccaneer ethic, the president said. It will also require work on deep, complicated issues like health care and energy, he said.
Mr. Obama said he saw a new America whose foundations are not built on sand but on rock, “proud, sturdy and unwavering in the face of the greatest storm.”
“We will not finish it in one year or even many,” he said, “but if we use this moment to lay that new foundation, if we come together and begin the hard work of rebuilding, if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time.”
AN over MEDICATED nation!
Stomach Bug Crystallizes an Antibiotic Threat
By TARA PARKER-POPE
Earlier this year, Harold and Freda Mitchell of Como, Miss., both came down with a serious stomach bug. At first, doctors did not know what was wrong, but the gastrointestinal symptoms became so severe that Mrs. Mitchell, 66, was hospitalized for two weeks. Her husband, a manufacturing supervisor, missed 20 days of work.
A local doctor who had worked in a Veterans Affairs hospital recognized the signs of Clostridium difficile, a contagious and potentially deadly bacterium. Although the illness is difficult to track, health officials estimate that in the United States the bacteria cause 350,000 infections each year in hospitals alone, with tens of thousands more occurring in nursing homes. While the majority of cases are found in health care settings, 20 percent or more may occur in the community. The illness kills an estimated 15,000 to 20,000 people annually.
“It’s been the worst thing I’ve ever tried to get through in my life,” said Mrs. Mitchell, who remains weakened by the ordeal. “I really did think I was going to die.”
What is so frightening about C. difficile is that it is often spurred by antibiotics. The drugs wipe out the targeted illness, like a urinary tract or upper respiratory infection, but they also kill off large portions of the healthy bacteria that normally live in the digestive tract. If a person comes into contact with C. difficile, or already has it, the disruption to the beneficial bacteria creates an opportunity for the harmful bacteria to flourish.
The public health community has been sounding the alarm for years about the overuse of antibiotics and the emergence of “superbugs” — bacteria that have developed immunity to a wide number of antibiotics. But the C. difficile problem shows that the threat is not generalized or hypothetical, but immediate and personal.
“One of the things that we counsel consumers about is to make sure that an antibiotic is really necessary,” said Dr. Dale N. Gerding, an infectious disease specialist at the Stritch School of Medicine at Loyola University in Chicago. “There are many good reasons for taking an antibiotic, but an illness like sinusitis or bronchitis winds up being treated with antibiotics even though it will go away by itself anyway.”
Even appropriate use of antibiotics can put a person at risk. Dr. Gerding said his own adult son came down with a C. difficile infection after taking antibiotics for tonsillitis.
The typical treatment for C. difficile is another course of antibiotics, typically the drug vancomycin. But the situation can quickly turn tragic. The Centers for Disease Control and Prevention has reported on several cases of pregnant and postpartum women who developed life-threatening C. difficile infections after being treated for minor infections. In some instances, a C. difficile infection can be treated only by emergency surgery to remove the patient’s colon. Doctors say many patients report that they continue to suffer from regular bouts of diarrhea even after the infection is gone. About 20 percent of patients with the infection suffer a relapse, and C. difficile support groups have emerged on the Internet.
In the case of the Mitchell family, Mr. Mitchell had been taking antibiotics for another health problem, and the treatment apparently led to his C. difficile infection. Mrs. Mitchell probably contracted the illness from her husband. The spores from C. difficile are hardy, and contaminated surfaces must be scrubbed down with bleach to eradicate the germ. Doctors say Mrs. Mitchell’s illness is unusual because most people are protected by their own bacterial flora and wouldn’t be vulnerable to C. difficile if they had not been taking antibiotics, even after close exposure. The risk of contracting C. difficile outside the health care setting remains low, at about 7 cases per 100,000 people, studies show.
C. difficile is not a new illness, but it appears to be spreading at an alarming rate. The rate of C. difficile infection among hospital patients doubled from 2001 to 2005, according to an April 2008 report from the C.D.C. The rise in C. difficile cases around the world is linked with the growing use of all antibiotics, particularly a class of drugs called fluoroquinolones, which came into widespread use around 2001. The use of acid-suppressing drugs, including proton pump inhibitors like Prilosec, also may be a risk factor, although studies have been contradictory.
In addition to becoming more common, C. difficile is also becoming more deadly. Several years ago, the mortality rate from a C. difficile infection was around 1 to 2 percent. But today, various studies estimate that the death rate is 6 percent. The reason is that a hypervirulent strain has emerged that emits higher levels of toxins than earlier strains.
Many patients are far more familiar with another superbug, methicillin-resistant Staphylococcus aureus, or MRSA, which can cause a severe and potentially deadly skin infection. MRSA started off primarily as a hospital-based infection but has become increasingly common in the community.
Hospitals may become more motivated to control C. difficile if the Centers for Medicare and Medicaid Services decides to withhold reimbursement for cases of hospital-acquired C. difficile infections. The system already withholds reimbursement for certain other preventable hospital infections.
In addition to careful use of antibiotics, patients and hospital visitors should always be vigilant about hand washing, and visitors should not sit on a patient’s hospital bed or use a patient’s restroom if it can be avoided. Patients should always report severe diarrhea symptoms to a doctor, particularly if they have taken antibiotics recently.
“Up until about 2002, this was a very mild disorder and very few people ever died from it,” said Dr. Perry Hookman, a gastroenterologist and associate professor of medicine at the Miller School of Medicine at the University of Miami. “But in the past few years the bugs have become hypervirulent, more severe and now it’s a global threat.”
By TARA PARKER-POPE
Earlier this year, Harold and Freda Mitchell of Como, Miss., both came down with a serious stomach bug. At first, doctors did not know what was wrong, but the gastrointestinal symptoms became so severe that Mrs. Mitchell, 66, was hospitalized for two weeks. Her husband, a manufacturing supervisor, missed 20 days of work.
A local doctor who had worked in a Veterans Affairs hospital recognized the signs of Clostridium difficile, a contagious and potentially deadly bacterium. Although the illness is difficult to track, health officials estimate that in the United States the bacteria cause 350,000 infections each year in hospitals alone, with tens of thousands more occurring in nursing homes. While the majority of cases are found in health care settings, 20 percent or more may occur in the community. The illness kills an estimated 15,000 to 20,000 people annually.
“It’s been the worst thing I’ve ever tried to get through in my life,” said Mrs. Mitchell, who remains weakened by the ordeal. “I really did think I was going to die.”
What is so frightening about C. difficile is that it is often spurred by antibiotics. The drugs wipe out the targeted illness, like a urinary tract or upper respiratory infection, but they also kill off large portions of the healthy bacteria that normally live in the digestive tract. If a person comes into contact with C. difficile, or already has it, the disruption to the beneficial bacteria creates an opportunity for the harmful bacteria to flourish.
The public health community has been sounding the alarm for years about the overuse of antibiotics and the emergence of “superbugs” — bacteria that have developed immunity to a wide number of antibiotics. But the C. difficile problem shows that the threat is not generalized or hypothetical, but immediate and personal.
“One of the things that we counsel consumers about is to make sure that an antibiotic is really necessary,” said Dr. Dale N. Gerding, an infectious disease specialist at the Stritch School of Medicine at Loyola University in Chicago. “There are many good reasons for taking an antibiotic, but an illness like sinusitis or bronchitis winds up being treated with antibiotics even though it will go away by itself anyway.”
Even appropriate use of antibiotics can put a person at risk. Dr. Gerding said his own adult son came down with a C. difficile infection after taking antibiotics for tonsillitis.
The typical treatment for C. difficile is another course of antibiotics, typically the drug vancomycin. But the situation can quickly turn tragic. The Centers for Disease Control and Prevention has reported on several cases of pregnant and postpartum women who developed life-threatening C. difficile infections after being treated for minor infections. In some instances, a C. difficile infection can be treated only by emergency surgery to remove the patient’s colon. Doctors say many patients report that they continue to suffer from regular bouts of diarrhea even after the infection is gone. About 20 percent of patients with the infection suffer a relapse, and C. difficile support groups have emerged on the Internet.
In the case of the Mitchell family, Mr. Mitchell had been taking antibiotics for another health problem, and the treatment apparently led to his C. difficile infection. Mrs. Mitchell probably contracted the illness from her husband. The spores from C. difficile are hardy, and contaminated surfaces must be scrubbed down with bleach to eradicate the germ. Doctors say Mrs. Mitchell’s illness is unusual because most people are protected by their own bacterial flora and wouldn’t be vulnerable to C. difficile if they had not been taking antibiotics, even after close exposure. The risk of contracting C. difficile outside the health care setting remains low, at about 7 cases per 100,000 people, studies show.
C. difficile is not a new illness, but it appears to be spreading at an alarming rate. The rate of C. difficile infection among hospital patients doubled from 2001 to 2005, according to an April 2008 report from the C.D.C. The rise in C. difficile cases around the world is linked with the growing use of all antibiotics, particularly a class of drugs called fluoroquinolones, which came into widespread use around 2001. The use of acid-suppressing drugs, including proton pump inhibitors like Prilosec, also may be a risk factor, although studies have been contradictory.
In addition to becoming more common, C. difficile is also becoming more deadly. Several years ago, the mortality rate from a C. difficile infection was around 1 to 2 percent. But today, various studies estimate that the death rate is 6 percent. The reason is that a hypervirulent strain has emerged that emits higher levels of toxins than earlier strains.
Many patients are far more familiar with another superbug, methicillin-resistant Staphylococcus aureus, or MRSA, which can cause a severe and potentially deadly skin infection. MRSA started off primarily as a hospital-based infection but has become increasingly common in the community.
Hospitals may become more motivated to control C. difficile if the Centers for Medicare and Medicaid Services decides to withhold reimbursement for cases of hospital-acquired C. difficile infections. The system already withholds reimbursement for certain other preventable hospital infections.
In addition to careful use of antibiotics, patients and hospital visitors should always be vigilant about hand washing, and visitors should not sit on a patient’s hospital bed or use a patient’s restroom if it can be avoided. Patients should always report severe diarrhea symptoms to a doctor, particularly if they have taken antibiotics recently.
“Up until about 2002, this was a very mild disorder and very few people ever died from it,” said Dr. Perry Hookman, a gastroenterologist and associate professor of medicine at the Miller School of Medicine at the University of Miami. “But in the past few years the bugs have become hypervirulent, more severe and now it’s a global threat.”
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